Regulation to make housing affordable

Shenzhen's housing authorities introduced a notice on Wednesday, strengthening regulation to curb fast rising housing prices.

The notice prohibits a registered permanent resident of Shenzhen from buying commercial housing there till he has received permanent resident status, for at least three years and paid individual income tax or social insurance premium for at least 36 consecutive months. Residents without hukou can buy commercial housing only after they have paid individual income tax or a social premium for five continuous years.

China's property prices have remained generally stable over the past few years, thanks to the principle of "a house is for living in, not for speculation". However, the novel coronavirus outbreak has had a huge impact on China's economy, greatly affecting people's employment and incomes. Rents in first-tier cities have dropped, but housing prices in some cities have risen significantly.

In Shenzhen, for example, official data show some 60,700 newly-built and second-hand houses were sold in the first half of 2020, up 24.34 percent year-on-year. The average price of a home in Shenzhen in June was 74,929 yuan ($10,722) per square meter, up 14.37 percent year-on-year, statistics show.

Decoupling of asset price rises from the real economy is a monetary phenomenon. In 2014, in order to support economic growth, the authorities gradually lowered interest rates and increased money supply, triggering a rise in the stock market, and then a rapid rise in housing prices in Shenzhen and other cities. Now, to offset the impact of the pandemic on the economy and stabilize growth, the country has once again entered a new round of monetary policy easing, which has again led to a long-unseen stock market boom and housing price rise in some cities, such as Shenzhen.

While curbing speculative demand, regulatory policies usually fail to ease long-term pressures of price rise created by rising housing demands in first-tier cities. Due to its small area in general, Shenzhen's urban development space is insufficient. The lack of sufficient housing supply, the largest per capita GDP in China and its core status in the Guangdong-Hong Kong-Macao Greater Bay Area have led to expectations for housing price rise in Shenzhen.

The epidemic has led to rising protectionism in some countries and the use of political means to undermine China's industrial supply chains. This, along with continuously rising housing prices, will put more pressure on China's manufacturing industry. Therefore, whether from the perspective of social problems and financial risks brought by rising housing prices, or from the perspective of the development of the manufacturing industry, the principle of "a house is for living in, not for speculation" should be strictly implemented.